HollandGrand Haven Jobs View On Decline

January 14, 2008
| By Pete Daly |
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HOLLAND — It's a case of bad news/good news from the most recent Upjohn Institute study of employment in the Holland area. Employment is predicted to drop slightly in 2008, by perhaps 0.8 percent — but employment may grow by 1 percent in 2009, and the above-average education level of the residents will help.

George Erickcek, senior regional analyst at the W.E. Upjohn Institute for Employment Research in Kalamazoo, presented an Employment and Economic Forecast for the Holland area (including Grand Haven) to the Holland Area Chamber of Commerce last week.

Erickcek began with a review of 2007, which, he said, was "not as good as many people had hoped." He said the institute’s forecast for last year was overly optimistic. It had predicted employment growth of only 0.5 percent, but now it is estimated employment there actually dropped about 0.4 percent in 2007 — "much of it in manufacturing and, in particular, in auto-related activities," he said.

"What was more concerning to us is that services, including retail, health care and business services, also fell or at least were flat," said Erickcek. He said actual employment in services may have dropped by 0.1 percent.

"We fully expected the manufacturing sector to do poorly in 2007, but we were totally caught by surprise by the total lack of growth in terms of employment in services."

Erickcek said a "strong headwind" is facing the Holland area economy in 2008, from two sources: the slowdown in the national economy, and the Michigan economy in particular.

Research by the University of Michigan indicates that 47,420 jobs were lost in the state in 2007, he said, mostly in southeast Michigan but with a ripple effect felt all the way across the state.

More disturbing, he said, is that the U-M data indicates as many as 81,000 jobs could be lost in Michigan in 2008. The federal Bureau of Labor Statistics estimates that 450,000 jobs were lost in Michigan from 2000 to 2007.

"We truly have never seen this before," said Erickcek. It is mainly attributable to the decline of the American automobile industry. He said the Big Three had a 74 percent share of the North American market in 2001; today it is 52 percent.

Housing starts for the Holland area are also an indicator of an ailing economy, said Erickcek. In 2007, the number of building permits issued was equal to 40 percent of the number in 2004. Nationally, that number is 70 percent.

Office furniture and automotive parts are the two manufacturing pillars of Ottawa County. The Business & Institutional Furniture Manufacturers Association is forecasting that office furniture production in 2008 will be down slightly from 2007.

Erickcek predicted overall employment in the Holland/Grand Haven MSA will decline by about 0.8 percent in 2008. The goods production sector will decline by 2.1 percent, while there will be "another year of flat conditions in services … and flat in government (employment), as well."

However, "In 2009, we expect everything to rebound," said Erickcek, who predicts a 1 percent growth in employment.

Ottawa County has an unusual amount of manufacturing, according to Erickcek, which is reflected in unemployment statistics.

"Manufacturing accounts for 51 percent of the gross regional product generated in the county," he said. "That is in comparison to the nation as a whole, where it is only 12.6 percent."

"So we are looking at an area that is extremely concentrated in manufacturing. And manufacturing is expected to lose jobs because of productivity improvements," he said.

Increased productivity means fewer employees are required for the same level of output.

"Our data suggest the manufacturers both in automotive and office furniture and other sectors are extremely competitive," said Erickcek.

If there is a disappointing year ahead in manufacturing employment statistics, he said, it is due to the fact that "there's just a lot more of them (manufacturers) in Ottawa County than elsewhere. And overall, because of productivity (improvements) and increasing global competition, you can't expect much growth there."

Erickcek said job losses are actually due to productivity gains two-thirds of the time, and to global competition the remaining one-third. Most of the jobs lost to foreign manufacturing are generally the "least productive segment of the market," with processes that are labor intensive. The result is that American manufacturing is getting consistently leaner, with more high-tech equipment and advanced processes.

In fact, he said, industrial output is "doing great" in the U.S., that the country is "really producing … more stuff today than we were in the 1990s and early 2000s, but we're doing it with fewer and fewer people."

Erickcek said there are currently about 14 million people employed in manufacturing in the U.S.

He added that the "only way to keep these people on the job is to continue to gain in productivity," which helps keep that manufacturing in the U.S.

The "wonderful paradox" in the Holland/Grand Haven MSA is that most concentrated areas of manufacturing tend to have a work force with less education than other areas, he said. Not so with this one.

Nationwide, the percentage of people age 25 to 34 who have a bachelor's degree or higher is 28.8 percent. In Muskegon, which he described as a "strong manufacturing center," the average is 18.7 percent. In Battle Creek it is 16.2 percent. In metropolitan Grand Rapids it is 26.5 percent.

"Then we get to Holland. And Holland is 31.5 percent," said Erickcek.

He speculated that may be due to the attractive lakeshore, which entices professional workers. The proximity to Grand Valley State University helps, too. And then he noted that the office furniture makers and companies like Gentex "are some of the more advanced, highly engineered manufacturing operations in the world."

Erickcek said that the Holland area work force looks more like it has the capacity to make the transition from manufacturing to services than do other metropolitan areas that are heavily concentrated in manufacturing.

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